Bolstering Business: Four Tactics That Can Help You Boost Customer Acquisition For Your Startup
Customer acquisition is the process of moving a person farther along the customer journey, where they start out as a stranger, and by the end, are turned into a customer.
This article has been built in collaboration with Young Arab Leaders, a not-for-profit organization founded by H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, to develop the next generation of leaders in the Arab world through entrepreneurship, education, and employment.
Among the many challenges that entrepreneurs face when starting a business is winning customers. It stands without saying that without customers, there is no business. And while the initial influx of customers can be exciting, a business should plan for a customer acquisition that is sustainable and inducive to growth.
There are certain tactics that entrepreneurs can use to boost customer acquisition. This article will detail four main tactics to do so: knowing your target audience, choosing the right channels for marketing, producing the right content, and calculating customer acquisition costs (CACs).
But before we continue, we must begin by defining the key term: customer acquisition. Simply put, customer acquisition is the process of bringing new customers to your business. These customers are willing to buy the products or services that your business is providing.
Customer acquisition is the process of moving a person farther along the customer journey, where they start out as a stranger, and by the end, are turned into a customer. In other words, you build enough awareness, interest, and consideration in your business to convince them to make a purchase.
It is a step towards customer retention, where a customer becomes a repeat buyer. In order to keep your customers, you need to first gain them. Bear in my mind that the end goal, beyond acquisition and retention, is to inspire brand loyalty and advocacy.
Marketing is important for customer acquisition. To gain a customer, you need to successfully market to them. There are various ways to do so, but marketing must first be understood to be a continuous process, as your business will always be looking for new customers to add to its customer base. Also, remember that it takes a lot of money and dedication to build awareness, inspire interest, and create trust in your organization, let alone convince a potential customer to conduct business with you.
Now that all the bases are covered, we can move on to discussing the chosen tactics, which by no means make up a comprehensive list of tactics, but are nonetheless worth exploring in detail.
1. KNOWING YOUR TARGET AUDIENCE According to CB Insights, 42% of the 101 businesses they surveyed failed because there was no market need for their products, making it the number one reason for failure. Moreover, 17% failed because their product was user-unfriendly, 14% because of poor marketing, and 14% because they ignored customers.
Before anything else, you need to know whether your product has an audience to begin with, and that it fills a gap in the market of wants and needs. Then, once sure your business has a market, you need to ask yourself how you can reach your target audience.
It is vital for the success of your business to know who you are marketing to, i.e., who is most likely to purchase your product. The demographic information of your target audience is important here, and it will determine what kind of strategies to adopt. Use information like age, gender, ethnicity, education, income, and shopping behavior to gain the most customers out of a tailored marketing plan.
While conducting research to define your target audience and develop your marketing plan, it is also wise to listen to the feedback of existing customers if possible, as they will tell you what works and doesn't work, as well as guide you in determining the characteristics of other potential customers, helping you further refine your target audience.
2. CHOOSING THE RIGHT CHANNELS FOR MARKETING When you are starting your business, it is recommended that you dedicate between 12% and 20% of your projected revenue to marketing. That is a considerable amount of money that you don't want to squander on an underdeveloped and ineffective marketing plan.
A good marketing plan includes choosing the right channel to spread your message. Marketing channels today are grouped into two categories, traditional and digital, each with their own set of pros and cons. Knowing which channels to use is essential to increasing the number of customers.
Traditional marketing is an old form of marketing established before the internet. Its channels include television, radio, print, billboards, telephone, etc. On the upside, traditional marketing is harder to ignore and can be used to increase general exposure to your brand. On the downside, it can be more expensive than digital marketing and its effectiveness is not as easily measured. It is also less helpful in targeting specific segments of society.
Digital marketing utilizes electronic devices and the internet for the promotion of businesses. Its channels include websites, social media, email, mobile applications, etc. Advantages include digital marketing's global outreach, but also its ability to reach very specific target audiences. Additionally, online metrics are available to let you know how people respond to your marketing. Digital marketing is also cheaper and faster to implement. Disadvantages, meanwhile, include information overload that makes marketing easy to overlook and ignore. Also, digital marketing is time consuming and often requires a trained, dedicated team to it carry out.
It's up to the business to determine what channels work best for them. The recommendation is to market on different fronts, while also taking into consideration channel accessibility, budget, target audience, and staff availability. This will help maximize exposure, thus boost customer acquisition and sales.
For example, if your target group is young men between the ages of 18 and 24, then digital marketing is preferred over traditional marketing. When it comes to channels, say social media, then Facebook and Instagram are better options over platforms like Pinterest, where 78% of users are female, or Twitter, where 68% of users are men but the largest age group is between 30 and 49 years old.
3. PRODUCING THE RIGHT CONTENT The content you put out most surely affects customer acquisition. What content you deliver, how, and where you present it are not just inconsequential details. The content either piques a person's interest, convincing them with time to buy from you, or leaves them unaffected. That is why producing the right content is important.
One important way of sharing content is via a blog, where you can go into details about products and experiences relevant to your business. It's worth noting that 57% of marketers say they gained customers through blogging. This makes it a great asset that can be leveraged to gain customers. Keep in mind that posts with over 2,000 words generate stronger results, and that adding visuals gets 94% more views. Moreover, sharing your blog on social media garners for the posts and your website more attention.
Another way of sharing content is via video, which is now the most common used form of content marketing. Importantly, 80% of video marketers say that videos have directly increased sales. Videos require a lot of planning, from scripting to shooting and editing. You can also opt to add animation or track footage, usually as part of an explanatory or storytelling video. Make sure you have it all prepared ahead of time and that you have hired the right talent to help produce your videos, a lot of whom can be outsourced to save on costs.
4. CALCULATING CUSTOMER ACQUISITION COSTS Customer acquisition cost (CAC) is used to approximate the cost of acquiring a new customer. It is a formula calculated by dividing the total cost of sales and marketing by the number of customers acquired over the same period of time. For example, if a business has spent US$200 on marketing in a month and acquired 100 customers, then the CAC is $2.
A CAC in and of itself has no real value, unless by comparing CACs together and to other metrics. Comparing CACs allows you to choose the most cost-effective way of gaining customers. One way to do so would be to compare CACs on a monthly, quarterly, or yearly basis -basically, a specified period of time- to see which campaign was most successful. Or you could calculate CACs by marketing channel to compare effectiveness.
However, remember to exercise good judgment when reading the numbers and comparing them. For example, suppose you are comparing Channel A to Channel B, their respective CACs being $1 and $2. You would assume that Channel A is the better option. But you would not be as certain if you found out that Channel A was used only once during the measured period for $10 and 10 customers, while Channel B was used numerous times for a total of $2000 and 100 customers.
Importantly, CAC can be compared to other metrics, such as customer lifetime value (CLV). CLV is used to calculate a customer's lifetime value to the business. The CLV:CAC ratio can then be calculated to determine customer profitability. Generally, a CLV:CAC ratio of one-to-one means your business is failing because you are spending too much on customer acquisition, whereas a value of around three-to-one means you are achieving growth, where customer value is three times what you are spending on acquisition.
As stated in the beginning, this is by no means a comprehensive list of tactics for boosting customer acquisition. Other tactics include utilizing search engine optimization (SEO), for example, but have not been discussed here. The ones that are chosen for discussion will hopefully start familiarizing entrepreneurs with tactics that help them gain customers, as they navigate the difficult world of starting and growing a business.